ARTICLE

By Frank Holder

How Virtual Communities and Networks are Driving Higher Ethical Standards

Written by Frank Holder

Social media is democratizing the regulatory role. Reports of corruption, graft, and other unethical practices now spread around the globe almost instantaneously. As they do, social media anchors a virtuous cycle of individuals and NGOs policing business integrity and supporting efforts of governments and regulatory agencies.

Social media provides a dynamic, 24/7 flow of information that gives the public unprecedented access to the doings of government and business. As a result, the citizenry can quickly expose instances of fraud and/or corruption to millions and rally those millions ruthlessly around the perpetrators.

Walmart learned this the hard way. In 2012, The New York Times broke the story of the company’s alleged efforts to cover up bribery in Mexico. What may have disappeared quickly if Walmart had addressed the problem head on became fodder for millions of blog posts and tweets. Figuratively, social media gave the company a black eye.

A Formidable Force Around the World

Although it may seem that social media is exposing ever-increasing incidences of corruption, the wrongdoings have always been there. Social media is simply the spotlight that is revealing much more of it. And that light is getting more intense around the world.

In India, for example, ipaidabribe.com uses crowdsourcing to publicize petty bribery demands that citizens encounter in routine tasks such as getting a driver’s license. By posting bribery reports, the site has successfully shamed government departments and spurred them into action. Bangalore’s Transport Commission, for example, now offers driving tests and license renewals online so citizens can steer clear of officials who often demand payments.

In China, social media has identified hundreds of cases of corruption. According to state-run Xinhua News Agency, China’s new media platforms—including online microblogs, forums, and the nation’s most popular social media site, Weibo—were responsible for uncovering 156 confirmed cases of corruption between 2010 and 2012. According to a report by the Chinese Academy of Social Sciences, social media is playing a much larger role in identifying corruption than are traditional newspapers and television.

Other examples abound. Golos in Russia provides information to improve election monitoring. Cuidemos El Voto in Mexico has similar aims. In Cambodia, Sithi uses crowdsourcing to identify human rights violations. Politika in Croatia is an anti-corruption blog and database of public information.

The 2014 anti-corruption law in Brazil (the Clean Companies Act) is a dramatic example of the social media spotlight exerting unstoppable pressure. The law had been gathering dust in the legislature despite Brazil’s reputation as a market where paying bribes was a common—and vexing—occurrence in business.

The populace took their anger to the streets and social media. Facebook membership in Brazil is the second largest in the world and the site became a fulcrum for the public to share outrage and organize anti-corruptions protests. The pace of protests steadily mounted. In 2011, some 20,000 protesters took part in the March against Corruption in Brasilia. By 2013, tens of thousands were marching in Brazil’s biggest cities, including São Paulo, Rio de Janeiro, Belo Horizonte and Brasilia. This year, social media mobilized even more thousands to join flashmobs at shopping centers across the country. With its citizens taking to the streets and the world’s eyes on Brazil’s business practices in the wake of the World Cup, the legislature was forced to relent and pass its anti-corruption law.

The Power of Transparency

The importance of self-policing and a transparent stance to all constituents was proven long before the rise of social media. Consider the very different fates of Arthur Andersen and the German industrial conglomerate Siemens.

The Enron scandal toppled Arthur Andersen. Even before the scandal emerged, the accounting firm was defending its and Enron’s practices. Practically to the end, Arthur Andersen swore that it had looked but hadn’t discovered any wrongdoing on the part of Enron. At the same time, the firm was hiring lawyers to prepare its defense. Ultimately, Andersen was charged with criminal conduct. When its clients realized the company had been aware of its transgressions all along, their trust in it evaporated: the nearly 100-year-old company folded in just a few months.

Siemens took a very different tack. In 2006, 30 of its offices were raided on suspicion of bribery, embezzlement and tax evasion. Unlike Andersen, however, Siemens admitted its guilt and acknowledged the failure of its internal controls. By so doing, the company has managed to survive and continues to be on a path to regaining the trust of its stakeholders and the public. Just as important, Siemens publicized the idea that it had learned from its mistakes and shared its considerable efforts to improve the company’s control systems.

The rise of social media is bolstering the type of transparency Siemens championed. Government and business leaders realize they can no longer contain news of a disaster. A decade ago, for example, the 2012 factory fire in Bangladesh might have remained a local story; however, through social media, it became a global cause célèbre.

Crisis managers in countless companies realized that their constituents could quickly learn about any poor working conditions in which their companies were complicit. Businesses around the world examined the level of employee safety in their offshore manufacturing partner locations. They also reported any steps they were planning to take in light of their investigations. The stakes of not doing so were perilously high—permanent damage to a company’s reputation and ability to survive. The pressure that social media exerts is starting to drive higher ethical standards. Everyone, everywhere, knows what businesses and governments are doing. Those activities must meet the muster of public scrutiny.